Michigan Cannabis Tax Under Siege as Industry Files Second Lawsuit Just Days Before April 20 Payment Deadline

Michigan Department of Treasury Issues Updated Guidance on 24% Wholesale Tax While Supreme Court Looms

LANSING — The Michigan Department of Treasury has issued updated guidance on the state's 24% wholesale marijuana tax, giving cannabis operators long-awaited clarity while intensifying pressure as the first tax payments come due April 20.

The deadline arrives as the tax faces a fast-tracked legal challenge now headed directly to the Michigan Supreme Court, with hundreds of millions in road funding and industry profitability on the line.

For cannabis businesses, the message is blunt. Pay now, comply fully, and wait for the courts to decide what happens next.

$420 Million at Stake for Roads

Under the state's Comprehensive Road Funding Tax Act, the 24% wholesale cannabis tax is projected to generate approximately $420 million annually, much of it earmarked to help fix Michigan's aging roads.

That funding expectation is a major reason the case is being accelerated. If the tax is struck down, a significant hole could open in the state budget, planned road and infrastructure projects could be disrupted, and lawmakers may be forced to find replacement funding quickly.

This is no longer just a cannabis issue. It is a core infrastructure funding question.

Construction Industry Wants Certainty, Fast

The Michigan Cannabis Industry Association and several cannabis operators are challenging the tax, arguing it places an excessive burden on the industry.

At the same time, Michigan's construction sector is watching closely and pushing for a quick resolution. Contractors and infrastructure planners rely on predictable funding streams. Uncertainty around a projected $420 million revenue source creates real operational challenges for project timelines, hiring decisions, and capital investments.

The longer the legal fight drags on, the more ripple effects it could have across the broader economy.

April 20 Deadline Creates Immediate Pressure

The April 20 payment deadline is the first real test of the new tax. Operators must calculate taxable wholesale transactions since January 1, apply the full 24% tax, and remit payment to the state all while knowing the tax itself may not survive the court challenge.

Failing to comply now could trigger penalties even if the tax is later overturned.

The Treasury guidance clarifies several key points:

• Cannabis first sold to a retailer before January 1, 2026 is not subject to the tax even if resold later
• Mixed inventory is fully taxable if sold after January 1
• The wholesaler must pay and remit the tax
• The taxable price includes additional charges listed on invoices
• Only the first retail transfer is taxed

Second Lawsuit Targets Tax Structure Itself

The Michigan Cannabis Industry Association has filed a second lawsuit challenging the state's 24% wholesale tax on marijuana, arguing the levy drives up costs that are ultimately passed on to consumers.

This new lawsuit is different from the first, which challenged the legislative process used to pass the tax. This one targets the legality of the tax structure itself.

The association argues the added costs are passed directly to consumers, worsening affordability at licensed shops at a time when customers are already feeling financial pressure.

"This new lawsuit exposes how the 24% wholesale tax imposed by the state is unconstitutional," Rose Tantraphol, a spokesperson for the association, told Spectrum News on April 2.

The association contends the tax creates a practice known as tax pyramiding, in which the added wholesale cost becomes part of the base used to calculate Michigan's existing sales tax. That inflated base pushes the effective tax rate consumers pay beyond the 6 percent rate the state constitution permits.

Cannabis customers are paying an effective sales tax rate that is higher than the legal 6 percent sales tax rate.

Governor Candidate Enters Debate

Genesee County Sheriff Chris Swanson is running for governor and has taken a strong stance on the issue. He wants to repeal the 24% wholesale cannabis tax that has been slowly strangling the state's legal marijuana industry since it took effect on Jan. 1.

"It is not pretty," Swanson said about the tax. "The tax was signed by Gov. Gretchen Whitmer, a Democrat, as part of a bipartisan road funding deal in October 2025. It is not assessed on profit. It is assessed on wholesale price, so when an ounce of recreational flower sells for as little as $60, operators are paying taxes before they know if they will break even."

Stack that on top of the existing 10 percent retail excise tax and 6 percent sales tax, and Michigan cannabis is now one of the most heavily taxed consumer goods in the state by a wide margin.

The results have been swift and brutal. Legal sales are already down double digits through the first two months of 2026. Layoffs and closures are accelerating.

"We cannot balance state budgets on the backs of one industry," Swanson said. "Excessive taxation drives consumers back to the illicit market and shrinks the legal one."

Swanson is pledging to roll back the 24% wholesale excise tax. He wants a replacement that is not aimed at a single industry.

Industry Caught Between Compliance and Uncertainty

Cannabis operators now face a high-stakes balancing act. Write checks by April 20 while the legality of the tax is still in question. That creates immediate pressure on cash flow, pricing strategies, and contract negotiations.

The Michigan Cannabis Industry Association Executive Director Robin Schneider publicly praised Swanson almost immediately after he went on the record, calling him bold enough to carry the industry's message and urging supporters to get behind the momentum.

Two Very Different Outcomes

If the Tax Is Upheld, it becomes a permanent cost structure, further compresses margins, and accelerates consolidation.

If the Tax Is Overturned, it leaves a major gap in road funding and forces lawmakers to act quickly. It could trigger refunds or financial adjustments.

The Bottom Line

Michigan's cannabis industry is now operating at the intersection of a 24% wholesale tax, an April 20 payment deadline, a fast-tracked Supreme Court decision, and $420 million in annual road funding at risk.

This is bigger than cannabis. It is a state budget and infrastructure story unfolding in real time, and the outcome will shape both Michigan's roads and its regulated cannabis market.